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Listen now! How To Help Prepare Your Heirs for Success in a Family Business

Learn tips in less than seven minutes to help you develop the rising generation to become tomorrow's business leaders.

young businesswoman and mature businesswoman

Podcast Transcript

Host: Dave Specht, National Development Manager for Family Dynamics, Wells Fargo Private Bank

Guest: Gary Shunk, Family Dynamics Consultant, Wells Fargo Private Bank

[Dave]:

In the United States, we are in the midst of the largest wealth transition in history, according to a study by Accenture. Much of the wealth will transition the family business from one generation to the next. So what are the current generation of business owners doing to help prepare the rising generation to be successful in their new roles?

I’m Dave Specht, National Development Manager for Family Dynamics for Wells Fargo Private Bank, and this is “Your Financial Journey,” a podcast series that explores questions that families of wealth commonly face. Today, I’m joined by my friend Gary Shunk, a Family Dynamics Consultant with Wells Fargo Private Bank.

Gary, as our listeners think about preparing the next generation in a family-owned business, where do they start?

[Gary]:

Well, Dave, the first thing is communication, especially communication regarding the career development plan that many of these owners already have in their head. The next generation is looking for opportunities and a plan for themselves within the organization. The most effective plans are well communicated, transparent, and predictable.

[Dave]:

I like the idea of transparent and predictable. Often we expect our children to be mind readers. For example, we may hear our business-owner clients complain that their kids won’t take more responsibility, but when we talk to their adult children we hear, “My parents are responsible for all the major decisions.”

[Gary]:

Exactly. Creating a plan for the next generation involves more engagement and coordination than a plan for nonfamily members, since their path may end in succession or ownership. Agreement and clarity from both the current owning generation and next generation are key. For example, start with the current and next generation having a conversation about where they want to go and how it is aligned and then map it to the needs of the business. The rising generation wants to know what they are responsible for in their job and how they can grow; they like feedback and want to know what opportunities exist for them to progress in leadership.

[Dave]:

Clear development path and regular, honest feedback are crucial. That seems like a reasonable request.

[Gary]:

It is a reasonable request, and sometimes the lack of communication and these standards can feel personal. It helps to create a process that allows for predictability.

[Dave]:

Interesting. So what other tips might you suggest for developing the rising generation, Gary?

[Gary]:

I would also say that a deliberate mentorship program is crucial. As the next generation’s responsibility within the business increases, they will need to learn and develop additional skills. Formal mentor relationships can really accelerate that development.

[Dave]:

Would you suggest these mentors be family members?

[Gary]:

Not necessarily. The ideal mentor is often not a family member and may be an employee or professional who has specific skills or attributes that the individual may need for their new role in the family business.

[Dave]:

So what does a successful mentorship program look like?

[Gary]:

I would say there are three keys: First, both parties agree to work together and challenge each other to grow. Second is to define skills that are aligned with the goals of the individual being mentored, specifically focused on helping him or her to advance in the family business. And third is regularly scheduled meetings and progress checkups.

[Dave]:

That is great counsel, Gary. Do you have other thoughts about how to help the rising generation prepare in their leadership roles?

[Gary]:

Absolutely. In my experience, the most successful multigenerational families attribute their success to the emotional ownership of the enterprise. By that, I mean empowering the next generation to start thinking like an owner. That can sound like:

  • I feel as if I belong to the family business.
  • The family business is an important part of who I am.
  • What happens to the family business matters to me.

Creating this connection is a process, not something that comes from one conversation. One of the most effective ways to help the next generation to build an emotional connection is to help them understand and engage with the future vision of the company.

[Dave]:

So in order for business owners to help the next generation reach their potential, they need to create a clearly defined path, mentor relationships, and develop emotional ownership for the business. Those are great tips, Gary.

To learn more about how Wells Fargo Private Bank’s Family Dynamics Team can help you create a successful next generation of leaders in your family business, contact your Wells Fargo Private Bank Relationship Manager, who can introduce you to a Family Dynamics Consultant. Thank you for joining this podcast.

Source: “The Great Wealth Transfer,” Accenture, June 2012

Image created from iStock

What can Wells Fargo do for you?

Creating a plan for every generation of your family can be a challenge. Schedule time with your team to get started.

Wells Fargo & Company and its affiliates do not provide legal advice. Wells Fargo Advisors is not a legal or tax advisor. Please consult your tax and legal advisors to determine how this information may apply to your own situation. Whether any planned tax result is realized by you depends on the specific facts of your own situation at the time your taxes are prepared.

Wells Fargo Bank, N.A. offers various advisory and fiduciary products and services including discretionary portfolio management. Wells Fargo affiliates, including Financial Advisors of Wells Fargo Advisors, a separate non-bank affiliate, may be paid an ongoing or one-time referral fee in relation to clients referred to the bank. The bank is responsible for the day-to-day management of the account and for providing investment advice, investment management services and wealth management services to clients. The role of the Financial Advisor with respect to Bank products and services is limited to referral and relationship management services.

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